Why Iceland (the country) is suing Iceland (the grocery store)

The country of Iceland is taking the company of Iceland to court.

Iceland Foods, Ltd., a British frozen-foods supermarket chain, is being accused by the country’s government of “aggressively pursuing” cases against Icelandic companies that use the country’s name in their trademark or advertising. And it’s challenging the company’s privileges over use of the name with the European Union Intellectual Property Office.

"The government of Iceland is concerned that our country's businesses are unable to promote themselves across Europe in association with their place of origin - a place of which we are rightly proud and enjoys a very positive national branding,” it said in a statement, according to SkyNews. 

The dispute, with its roots in the financial crisis of 2008, may shine a light on how Iceland has managed to recover from its swift and overwhelming collapse to become what many analysts describe as a model for economic recovery.

Iceland Foods, founded in England in 1970, was actually Icelandic-owned for a period — retail conglomerate Baugur had a majority stake in the chain. In 2009, Baugur collapsed, and the supermarkets then passed into the hands of two different Icelandic banks before its founder Malcolm Walker took it over in 2014. 

The new ownership may have brought the current legal challenge upon themselves: Last year, they went after an entity named Islandsstofa for its use of the trademark “Inspired by Iceland” in its branding of products like meat, eggs, and coffee. That entity, the supermarket chain discovered later, was actually the government of Iceland.

“Had we known that the Icelandic government was behind it, we could have had a conversation - a conversation which we’d still be delighted to have,” a company spokesman told The Wall Street Journal. And the grocery chain contradicts the government’s assertion that it had tried to resolve the dispute outside of court, saying it had “received no recent approaches to achieve an amicable resolution of this issue, which would be our preferred approach.” 

This lawsuit, in a sense, is indicative of how far Iceland has come in recent years in restoring its "brand."

Iceland’s financial crash, from 2008-2011, amid a global financial meltdown, was epic. “No country has ever crashed as quickly and as badly in peacetime,” London School of Economics professor Jon Danielsson told The New York Times that year — was followed by a dismantling of the country's hugely expanded financial sector, which became notorious for its misconduct.

Having lured in a surfeit of cash from foreign sources with high interest rates, wrote the Washington Post in 2015, "Iceland's bankers went on a historically ill-advised buying spree. They bought foreign companies, they bought foreign real estate, they even bought foreign soccer teams...Iceland's banks were not only paying high prices for questionable assets, but also promising to pay their depositors high interest rates. This was about as unsustainable as business models get, and it wasn't that hard to tell." 

The government responded with prosecutions — over two dozen bankers and financiers have been convicted since 2010, as Bloomberg noted in March, in stark contrast to the US and Europe, where bank executives escaped legal consequences. It also guaranteed its citizens’ deposits, while refusing to cover losses by foreign depositors, and let its currency devalue by some 60 percent in a year. By 2013, its economy was growing again, mostly off the back of tourism.

That’s not to say Iceland has escaped the anti-establishment wave that has upended politics in Europe and the US. The Pirate Party, a hacktivist group that grew into a political party led by poet and transparency activist Birgitta Jonsdottir, managed to get a new, crowdsourced constitution approved by 67 percent of voters before the Icelandic parliament failed to ratify it. The party also captured 10 of the 63 seats in parliament in October elections.

"Whatever happens,” said Ms. Jonsdottir afterward, "we have created a wave of change in the Icelandic society."